Legal Due Diligence in Turkish M&A (Share Deal): A Practical Guide (2025)
Buying a company in Turkey—or buying shares in a Turkish company—can be a great opportunity, but it can also be risky if you rely only on financial statements or informal promises. In Turkish practice, many deal problems come from “hidden” legal issues: unpaid public debts, employee liabilities, defective corporate approvals, lawsuits, pledged shares, or contracts that block a sale. That’s why legal due diligence in Turkish M&A is not a formality—it’s how you price risk, structure warranties, and avoid post-closing surprises.
This article explains how due diligence in Turkey works for a typical share acquisition (share deal), what lawyers review, which red flags matter most, and how buyers protect themselves in the SPA.
1) What Is Legal Due Diligence in Turkey?
Legal due diligence is a structured legal review of the target company before signing or closing a transaction. The buyer’s goal is to confirm:
- the company’s legal existence and authority to sell,
- ownership and title (who owns the shares and whether they’re pledged),
- compliance status (corporate books, registrations, licenses),
- liabilities (lawsuits, contracts, employees, public debts),
- deal blockers (change-of-control clauses, consent requirements).
In Turkey, due diligence is especially important because some liabilities may not be obvious from surface-level documents.
2) Share Deal vs Asset Deal: Why It Matters
Most foreign investors prefer a share deal in Turkey because it’s usually simpler operationally: you buy the shares and keep the company running. But a share deal also means you inherit the company’s history—good and bad.
An asset deal can sometimes isolate risk by buying selected assets, but it can require more consents, transfers, and operational re-papering.
Practical takeaway: In a share deal, due diligence is your main protection tool because you are buying the entire legal “package.”
3) The Core Due Diligence Areas in Turkish M&A
A) Corporate and Shareholding (Cap Table) Review
Lawyers typically verify:
- Trade Registry records and corporate status,
- Articles of Association and amendments,
- share ledger and ownership chain,
- share pledges, usufruct rights, encumbrances,
- restrictions on transfers and pre-emption rights,
- whether required approvals exist for the sale.
Red flag examples:
- shares pledged to banks,
- missing corporate book records,
- transfer restrictions that require consents.
B) Authority and Approvals (Who Can Sign the Deal?)
A classic Turkish M&A risk is signing with the wrong authority. The due diligence team checks:
- board/shareholder resolutions for the transaction,
- signing authority limits,
- representation rules and registry registrations.
Deal risk: If approvals are missing, the transaction may be challengeable or create internal disputes later.
C) Contracts and Commercial Commitments
Due diligence typically focuses on:
- key customer and supplier contracts,
- distribution/agency agreements,
- financing agreements and guarantees,
- leases and long-term service contracts,
- IP/software licenses and critical technology contracts.
High-impact red flags:
- change-of-control clauses requiring counterparty consent,
- termination rights triggered by sale,
- exclusivity or non-compete burdens that limit growth,
- hidden guarantees given to third parties.
D) Litigation, Enforcement, and Regulatory Issues
Lawyers review:
- ongoing lawsuits and arbitration,
- enforcement proceedings and liens,
- administrative penalties and regulatory investigations,
- compliance history in regulated sectors.
Red flags:
- disputes with high damages exposure,
- repetitive tax disputes,
- sectoral compliance gaps.
E) Employment and HR
Employee liabilities can be one of the biggest “silent” risks. Review normally includes:
- employment contracts, benefits, policies,
- severance and overtime exposure,
- union/collective issues (if any),
- pending employee claims,
- work permits and immigration compliance for foreign staff.
Red flags:
- misclassified workers,
- underreported payroll patterns,
- unrecorded benefits or side arrangements.
F) Public Debts: Taxes and Social Security (SGK)
For many buyers, the most critical part is public debts and filing compliance:
- tax filings and disputes,
- social security compliance and audits,
- penalties, interest, and historical exposure.
Why it matters: Public liabilities can survive the acquisition and become a major post-closing problem if not addressed contractually.
G) IP, Data, and Technology
If the business is tech-enabled, due diligence often checks:
- trademark, patent, and domain ownership,
- software license compliance,
- assignment of employee-created IP,
- data protection compliance (KVKK context),
- cybersecurity and vendor access risks.
Red flags:
- IP registered in founders’ personal names,
- missing IP assignment clauses,
- risky licensing terms or open-source compliance problems.
4) Common Outcomes of Due Diligence (What Buyers Actually Do With Findings)
Due diligence findings typically lead to one or more of these deal actions:
- Price adjustment (risk pricing)
- Specific indemnities (targeted protection for identified risks)
- Conditions precedent (issues that must be fixed before closing)
- Escrow / retention (holdback for risk coverage)
- Deal restructure (asset deal instead of share deal, or partial acquisition)
In practice, the best deals don’t avoid risks—they allocate them clearly.
5) How Due Diligence Connects to the SPA (Warranties & Indemnities)
In Turkish share acquisitions, the SPA usually includes:
- representations and warranties (ownership, compliance, contracts, litigation, taxes),
- indemnities (specific known risks),
- limitations (time limits, caps, baskets, de minimis),
- disclosure schedules (what the seller discloses to limit liability).
Buyer strategy: Ensure the SPA protections match the actual risks found during due diligence—especially public debts, employee claims, and key contract consents.
6) Practical Tips to Run Due Diligence Faster (Without Missing Key Risks)
- Start with a focused scope: corporate, shares, authority, contracts, employees, public debts
- Request corporate books early (not just PDFs—ensure consistency)
- Prioritize key revenue contracts and financing/guarantees
- Ask specifically about pledges, liens, and enforcement proceedings
- Align findings with SPA drafting in parallel (don’t wait until the end)
FAQ
How long does legal due diligence take in Turkey?
It depends on the target’s readiness and document availability. Deals move faster when the target has organized corporate records and clean compliance history.
What is the biggest legal risk in Turkish share deals?
Commonly: public debts, employee liabilities, share pledges, missing approvals, and key contract consent issues.
Can a foreigner buy a Turkish company?
Yes. Foreign investors can acquire shares in Turkish companies, subject to sector-specific restrictions where applicable.
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